Ontario Tax - Assessment Act - General. Manulife v. Municipal Property Assessment Corporation et al
In Manulife v. Municipal Property Assessment Corporation et al (Div Court, 2023) the Divisional Court briefly summarizes the Assessment Act regime in Ontario:
Ontario’s property taxation regime. TransCanada Pipelines Ltd. v. Ontario (Minister of Finance)
 The Act requires MPAC to assess all properties in Ontario based on their current values: see s. 19. Section 1 of the Act defines “current value” as “the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer”.
 After determining the current value, the Board is required to “have reference to the value at which similar lands in the vicinity are assessed and adjust the assessment of the land to make it equitable with that of similar lands in the vicinity if such an adjustment would result in a reduction of the assessment of the land”: the Act, s. 44(3)(b). This is often referred to as an equitable adjustment.
 Ordinarily, property values are assessed every four years on statutory valuation dates. The current value as of the valuation date is then used as a base for every other year in the four-year cycle, barring any change to the property. The statutory valuation date of January 1, 2016 was intended to apply to taxation years 2017-2020. Due to the COVID-19 pandemic, the cycle was extended through subsequent regulations to apply to the 2021, 2022, and 2023 taxation years.
 The Act requires assessments of land to be made annually: see s. 36. Further, the Act provides an annual right of appeal of the most recent assessment returned by MPAC for various reasons, including on the basis that the current value of the property is incorrect: see s. 40(1).
In TransCanada Pipelines Ltd. v. Ontario (Minister of Finance) (Div Court, 2022) the Divisional Court canvassed the purpose of the Assessment Act, which regulates municipal property taxation:
a. The regulation is consistent with the purpose of the Assessment Act. Municipal Property Assessment Corporation v. Claireville Holdings Limited
 TransCanada argues the purpose of the Assessment Act is to provide for the assessment and taxation of real property in Ontario based on its current value. TransCanada argues that the formula in the regulation for valuing pipelines is inconsistent with this purpose because it does not account for current value.
 The Minister and MPAC argue the purpose of the Assessment Act is broader than TransCanada suggests. The Minister argues the purpose of the Act is simply to provide for the assessment and taxation of real property in Ontario. The Minister argues the Assessment Act itself contains different methods for assessing different types of real property, and only some methods are based on current value. Therefore, the purpose of the Assessment Act cannot be to assess all real property based only on current market value.
 I agree with the Minister and MPAC that the purpose of the Assessment Act is to provide for the assessment of real property in Ontario for tax purposes. A broader interpretation of the purpose of the Assessment Act is consistent with existing jurisprudence and with the language of the Act as a whole.
 Section 3 of the Assessment Act states that all real property in Ontario is liable to assessment and taxation, with some exceptions. MPAC is responsible for assessing real property in Ontario for taxation purposes in accordance with the Assessment Act and its regulations.
 TransCanada argues that purpose of the Assessment Act is narrowed by s. 19, which says that a land’s assessment “shall be based on its current value.” The term “current value” is defined in the Act as the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer: Assessment Act, s. 1.
 Sections 41 and 42 of O. Reg 282/98 contain a formula for assessing the value of pipelines in Ontario: the length of the pipe is multiplied by a set rate per linear foot (which depends on the type of pipe and its location). The value of the pipeline is then depreciated according to its age. Finally, a flat rate is added for each connection on the pipeline to an end user. The value of a pipeline can also be reduced for tax purposes if it is not the primary pipeline on a particular right-of-way or easement.
 In 2016, MPAC assessed TransCanada’s pipelines in Ontario as having a value of $1.747 billion using the formula in the regulation. According to TransCanada’s expert, however, the market value of the pipelines in question was only $592 million in 2016. Accepting TransCanada’s expert opinion at face value, the formula in the regulation results in an assessed value that is (or at least could be) significantly higher than the current market value of the pipelines in question. TransCanada argues that the formula is, therefore, inconsistent with the purpose of the Act and ultra vires the Minister’s regulation-making authority.
 The Court of Appeal for Ontario has commented on the purpose of the Assessment Act in several decisions. For example, in Ottawa Salus Corp. v. Municipal Property Assessment Corp., 2004 CanLII 14620 (ON CA),  OJ No. 213 at para. 25, the Court held:
The general purpose of the Assessment Act is obvious. It is expressed in s. 3(1) of the Act: “All real property in Ontario is liable to assessment and taxation . . .”. In Canadian Mental Health Ass'n v. Ontario Property Assessment Corp.,  O.J. No. 2199 (QL), 31 M.P.L.R. (3d) 79 (S.C.J.) at para. 42, Kozak J. described the purpose of s. 3(1) as follows: “to impose upon all real property in Ontario a general obligation to pay a property tax so that the government can meet its expenditures”. In Carsons’ Camp Ltd. v. Municipal Property Assessment Corp., 2008 ONCA 17 at para. 29, the Court of Appeal again held that the purpose of the Assessment Act is to assess all property in Ontario coming within the definition of land, real property and real estate. The Carsons’ Camp case deals with the interpretation of the term “current value” and whether it should include trailers owned by a third-party that were on the land being assessed. The specific issue was whether a change in the language of the Assessment Act (from “market value” to “current value” as the basis for assessments) changed the process for assessing the value of land.
The Ottawa Salus case dealt with the proper interpretation of one of the exemptions under the Assessment Act for property that is “owned, used and occupied” by charitable and not-for-profit organizations. The issue in that case was what it means to “occupy” land.
 TransCanada relies on a much earlier decision of the Court of Appeal in Mississauga v. Ontario, 1995 CanLII 687 (ON CA),  OJ No. 1010 (CA) to support its position that the purpose of the Assessment Act is to assess and tax property based on its current value. That case dealt with an earlier version of the Assessment Act. In 1970, the Assessment Act was amended to freeze the value of property for tax purposes at the 1969 market value. In effect, the 1970 amendments suspended the operation of some provisions of the Assessment Act, including the section that required all property to be assessed based on market value. In 1986, while the freezing provisions were still in effect, the Minister made regulations that created a class of land (railway roadways) to be reassessed. Like the argument being advanced by TransCanada, Mississauga argued the regulation was invalid because it provided a formula that assessed the value of railway roadways in a manner that was inconsistent with market value. In that case, the formula for assessing railway roadways resulted in an assessed value that was below the market value. The Court of Appeal upheld the regulation. The Court found that the “primary purpose” of the Assessment Act was that all property in Ontario “be assessed at market value.” Nonetheless, the Court found that the Legislature intended to specifically override the primary purpose of the Assessment Act when it enacted the freezing provisions. As a result, the Minister had authority to make regulations to reassess railway roadways based on a specific formula that did not account for current value.
 The decision of the Court of Appeal in Mississauga v. Ontario is not binding on this court for several reasons. First, the decision pre-dates Ottawa Salus and Carsons’ Camp, in which the Court defines the purpose of the Assessment Act more broadly. Second, the decision in Mississauga v. Ontario involved an older version of the Assessment Act and focused on provisions that are not in the current version. Third, the comments by the Court about the purpose of the Assessment Act in Mississauga v. Ontario were largely obiter. That case was really about the scope and application of the freezing provision, not whether the regulations would have been ultra vires had the freeze provisions not been in effect.
 The broader statement of the purpose of the Assessment Act in Ottawa Salus and Carsons’ Camp is more consistent with the language and overall structure of the Act. Section 3 of the Assessment Act lays out the overall purpose of the Act – to provide for the assessment and taxation of all real property in Ontario. Section 19 creates a default method for assessing land, namely based on its current value. However, the Act creates several exceptions to the general rule that land is to be assessed according to its current value. Pipelines are not the only class of property that are subject to a different method of assessment under the Assessment Act. Electricity generating and transformer buildings are assessed at a fixed rate per square metre: Assessment Act, s. 19(5.2) and O. Reg 282/98, s. 32.1. Wind turbine towers are assessed at a fixed rate based on their generation capacity: Assessment Act, s. 19.0.1 and O. Reg 282/98, s. 42.5. Given the Assessment Act contains several different methods for assessing real property, it is not accurate to say the purpose of the Act is to assess land based on its current value. Rather, the purpose is to ensure all land is subject to assessment and taxation.
 TransCanada also relies on this Court’s decision in Municipal Property Assessment Corporation v. BCE Place Limited (2009), 2009 CanLII 92126 (ON SCDC), 98 OR (3d) 581 to support its position that the purpose of the Act should be more narrowly defined. However, in BCE Place Limited, the Court found, at para. 61, that the purpose of the Act is “to subject all real property in Ontario to assessment and taxation.” The issue in that case was which method should be used to determine the current value of a large commercial building. The issue was not whether the property should be assessed based on current value or some other method of valuation. It is within that context that the Court held that the Act “intends that every parcel of land shall bear its proportionate share of municipal taxation in a fair and equitable manner, favouring neither the taxing authority through an over-valued assessment nor the taxpayer through an under-valued assessment.” The Court then held that the definition of “current value” must be interpreted in a manner that is fair.
 The decision in BCE Place Limited does not stand for the proposition that the purpose of the Act is to provide for the assessment and taxation of all real property at current value. If anything, the decision in BCE Place Limited supports an interpretation that the purpose of the Act is to subject all real property in Ontario to assessment and taxation in a manner that is fair. But there can be more than one method for assessing real property that is fair.
 I find that the purpose of the Assessment Act is to provide for the assessment and taxation of land in Ontario. Section s. 2(2)(d) of the Assessment Act gives the Minister the power to make regulations “governing the assessment of pipelines and providing for the depreciation of the assessed values of pipelines.” Sections 41 and 42 of O. Reg 282/98 create a formula for the assessment of pipelines for tax purposes. Those provisions are consistent with the purpose of the Assessment Act and are intra vires the Minister’s regulation-making authority.
In Municipal Property Assessment Corporation v. Claireville Holdings Limited (Div Court, 2022) the Divisional Court considered some principles of property tax law:
The Statutory Framework. Drewlo Holdings v. MPAC
 Subject to limited defined exemptions, all real property in Ontario is subject to assessment and taxation. Property assessment is the responsibility of MPAC, subject to appeal rights to the Board.
 Section 19(1) of the Act requires that land be assessed on the basis of its current value. Current value is defined in s. 1 of the Act as the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer.
 Section 19.2 prescribes the valuation dates for the assessment of properties. For the taxation years 2014 to 2016 land is valued as of January 1, 2012. For taxation years 2017 to 2020, land is valued as of January 1, 2016. There is therefore a four-year cycle between valuation dates.
 Notwithstanding this four-year cycle, s. 36(1) of the Act requires MPAC to assess properties annually and s. 36(2) requires that the assessment roll be returned to each municipality not later than the second Tuesday following December 1 in the year in which the assessment is made.
 Section 40(1) of the Act provides that any person may appeal an assessment to the Board, including on the basis that “the current value of the person’s land…is incorrect”. In such instances, s. 40(17) provides that the burden of proof as to the correctness of a current value of the land rests with MPAC.
Establishing Current Value
 Although HBU is not identified or defined in the Act, it is the governing element in establishing value for assessment purposes [see Re Tyandaga Golf & Country Club v. Town of Burlington, 1970 CanLII 251 (ONCA)]. That is, a property’s current value is to reflect its highest and best use.
 HBU is the reasonably probable and legal use of vacant or improved property that is: (i) physically possible; (ii) legally permissible; (iii) financially feasible; and (iv) maximally productive. An appraiser must determine the HBU of property as vacant and as improved. When considering property as vacant the focus is on the property’s development potential, but even where the property is improved the appraiser must determine whether those improvements should remain, be altered, or modified or whether they should be demolished, and the property redeveloped [see The Appraisal of Real Estate, 3rd Cdn. Ed. at p. 203].
The Presumption in Favour of Current Use
 In this case and others, the Board has expressed the view that the use to which a property is put at any given time is presumed to be its highest and best use, such that a party seeking to prove a different highest and best use will require compelling evidence of how another legally permissible, physically possible, and financially feasible use is more productive than its current use. The presumption is based on the reasonable assumption that the current use already meets the tests of being physically possible, legally permissible, and financially feasible. [See Toronto (City) Revenue Services and Municipal Property Assessment Corp., Region 09, 2017 CanLII 80039 (ON ARB), Canadian Tire Corporation Limited v. Municipal Property Assessment Corporation, Region 09, 2021 CanLII 105789 (ON ARB)].
 MPAC argues that the Board’s use of this presumption is an error of law as it conflicts with the direction in s. 19(1) of the Act that properties be assessed on the basis of their current value and not on their current use.
 In my view the Board made no error of law.
 The articulation of the presumption in favour of current use value must be considered in the context in which disputes such as this one come before the Board, namely: (i) that the assessed value of the property has, in the past, been based on its actual use, which has not changed; (ii) the current value of the property has been assessed anew based on a different use of the property; (iii) the owner contests the current value as assessed and takes the position before the Board that the property’s current or actual use should continue to be the basis for valuation; and (4) in accordance with s. 40(17) of the Act the burden of proof as to the correctness of the current value as assessed by MPAC rests with MPAC.
 In this context, the articulation of the presumption is little more than a re-statement of the burden of proof.
 In this case the Board made a factual determination that MPAC did not meet its burden of proof – that it did not establish a satisfactory evidentiary foundation for valuation based on a different use of the property. That left its current value to be determined based upon the current use of the property – the same use that had been the basis of the determination of its value in years past. The Board made no legal error in doing so.
Is the Highest and Best Use of the Property to be Determined Annually?
 MPAC submits that the Board made a legal error when it stated at paras. 20 and 21 of its decision that an assessor must determine the HBU of the land each year as of the state and condition date prescribed by s. 36(2) of the Act. It says that this interpretation of s. 36(2) effectively pre-empts the valuation standard in s. 19 and the statutory valuation dates in s. 19.2.
 Paragraph 21 of the Board’s decision, made in the context of its discussion of the state and condition date, is as follows:
 The assessor’s task is to determine, annually, at the state and condition date, the Highest and Best Use of the land assessed, then establish the correct value of such annual determination by reference to the valuation of land of similar Highest and Best Use on the legislated valuation day.
 Annual assessments are done so that changes in assessment can be made when there is a change in the state or condition of the property. If there is no change in the state or condition of the property, the assessed value would be expected to remain unchanged until current value is re-assessed for a new four-year cycle.
 Read in context, what the Board said was this: In determining the assessed value of a property when returning the assessment roll, the assessor must necessarily turn his or her mind to whether there has been a change to the state or condition of the property that affects its HBU. If there has been such a change, a new assessed value must be established for that HBU effective on the applicable valuation date prescribed in s.19.2.
 I see no legal error in the reasoning of the Board.
In Drewlo Holdings v. MPAC (Div Court, 2023) the Divisional Court reviews some aspects of the Assessment Act:
Legislative Scheme of the Act:
 As described in Toronto (City) v. MPAC, 2013 ONSC 6137 (CanLII) (known as “Shane B”), at para. 22, municipal property is assessed for tax purposes only once per year, for the most part, and that assessment is intended to be final, subject only to appeal. However, the Act does provide several mechanisms to allow changes to an assessment during a taxation year, usually to reflect changes such as improvements to the property, or a change in its classification. One such mechanism is section 33 of the Act which affords MPAC an opportunity to correct the Assessment Roll during the tax year.
 Both parties agree that the Act has two primary objectives: correctness and finality. These are often opposed. As described in Shane B, at para. 30, “[t]he principles of equity and finality are often in conflict and each must be weighed in the balance in arriving at the proper interpretation of the legislation”. Correctness ensures that the property tax burden is distributed equitably among all property owners. Finality prevents taxpayers and the municipality from having to continuously revisit tax assessments and permits them to order their affairs accordingly.
 In order to rely upon subsection 33(1) of the Act there are two prerequisites that must be met. The first is that “land liable to assessment has been in whole or in part omitted from the tax roll”. As noted by the Board, this part of the test requires a determination of what is meant by “land”. It also requires an examination of the term “omitted”. The second prerequisite is that “no taxes have been levied for the assessment omitted”.
 In Shane B, at paragraph 44, the Court described that s. 33(1) does not create a general power to review errors in valuation but is directed solely at correcting a situation where some or all of a property was erroneously omitted from the Assessment Roll. Absent such an omission, no change in the valuation of the property will be permitted. Further, at paragraph 46 in Shane B, Molloy J. described that s. 33 is intended to address specific situations that arise outside of the usual assessment process and to correct specific errors. It is not intended to be an alternate method to appeal the value set out in an assessment.